Grain futures are higher early Monday morning with soybean futures leading the way. Is there any upside left ahead of this week’s WASDE report?
We have Oliver Sloup with us right now. He’s with Blue Line Futures in Chicago. Let’s talk about the market action so far here today. So the soybean trade seems to be by far the winner on the green side. Why is that? And do you see more of that ahead?
Well, I think it’s that time of year where you start to get a lot of weather premium coming into the market from South America. And that’s part of the reason why we rallied from, you know, 13 bucks up to about 1370 in a fairly short amount of time. But 1370 is a big resistance level. It’s trendline resistance from that July high.
So I wouldn’t be surprised to see the market maybe take a little bit of pause here, especially with the USDA report just a couple of days away. And if we aren’t able to get out above 1370, maybe you get a little bit of long liquidation from recent buyers, which takes prices back down near the 50 and 100 day moving averages.
That comes in 1330 to 1340. Looking at the commitment, a trader’s report finds long just about 23,000 contracts, which is about as neutral as you can get. So I think managed money as a whole just kind of waiting for new news and that may come later this week. With that was the report.
Have you been able to tell on cash sales now that the harvest is kind of winding down here in the U.S.? Have the farmer cash sales kind of dried up or is there a flush of it now that they’re running out of that free storage period?
Yeah, Well, I think farmers still have quite a bit to sell, which has me a little bit nervous about the corn market in particular. It just doesn’t look all that great from a fundamental standpoint with the lack of demand in the supply side. Obviously really just kind of wrapping up as harvest continues to finish up. And so I think there might be a little bit more downside pressure in that December corn contract.
I wouldn’t be surprised to see us just kind of chop around here. In the intermediate term, though, I think where you might see potential movement outside of the recent range is when you get into option expiration and then to delivery. I think that’s when a lot of baby longs start to look for an exit there. And I wouldn’t be surprised to see the market break lower unless we get some sort of a shift in the fundamental landscape.
But I don’t see a whole lot of demand coming online here just in the next couple of weeks.
Do you know when they typically start shutting down the upper the northern shipping channels for the winter?
Yeah, I do not have a good idea on that, so I’m going to defer that question.
Okay. All right. Well, fair enough. I know with the recent rains, there was anticipation that the Mississippi River levels were going to come up, and that would mean they could fill the barges, maybe a little fuller, at least for a while, anyway. I just wonder if that has been helping the basis along the river system or not.
Yeah, I think that certainly is part of it. You know, it continues to be kind of a money flow game for us and what we’re keeping a close eye on. We look at the funds and their positioning and what they’re looking to do. And when you look at a market like the corn market, the futures really haven’t done anything.
We’ve just been a stick in the mud for the better part of the last couple months. Potentially, you know, we can trade back to 484. That’s the 50 day moving average and a recent break down point. But again, until these fundamental start to firm up, I think the bears do have control of the short side of the trade.
And that’s evident by the the positioning by the funds to their short about 144,000 futures and options contract. So they like that short position. They’ve been defending that short position and I don’t really see that changing any time soon.
Okay. Well, we’ll take a look at our cattle and hog market activity here on a monday when we return after a short break.
So Oliver the lean hogs starting to perk up a little bit here while the cattle are floundering.
What do you read into that now?
Yeah, well, I think the cattle are just a little bit disappointed. I think there was some expectation that we’re going to see a nice another exciting cash cattle Friday. And we really didn’t get that higher trade that everyone was hoping and looking for Friday afternoon. And we talked about the money flow and positioning in the grain side of things.
Well, it’s very similar in the in the livestock side of things are kind of move in the market right now. We’re not able to get any new news that’s bullish to the market. So you’re seeing continued long liquidation from managed money, a.k.a. the Funds Friday Commitment. A traders report showed their net long just about 56,000 contracts. That’s their smallest net long position in about exactly a year going back to last November.
So liquidation has been the current theme and I wouldn’t be surprised to see that continue. If the cash market can’t break out above recent levels now, does that mean the market’s really just going to fall out of bed? I don’t think so necessarily. I think we probably see this December contract trade 180 on the downside, 185 on the topside.
So a little bit of a trading range there, I think, for shorter term participation.
Well, of course, the funds had to have lightened up on positions once they gapped lower on the cattle after that cattle on feed report. And that’s to be expected. I mean, that was a huge washout for quite a while. But I mean, if they’re getting back in there again right now, I mean, do you just consider that a very large healthy correction?
It was a it was a very healthy correction. I’m actually a little bit surprised it didn’t come a little bit sooner in the year. They had defended a very large net long position for the better part of the year, really dating back to last spring, they were holding a net long position of over 80,000 contracts for multiple months, and they just didn’t have any reason to rush for the exits until that cattle on feed report.
So I think it was overall a nice reset and you can see that in the theater cattle complex as well. They were net long, nearly 20,000 contracts. Now they’re about flat. So I think that was a good reset and we can probably start to consolidate and see these markets be a little bit more range bound here going into the end of the year.
All right. Oliver covered a lot of ground, and I appreciate that very much. Always slope with us. He is with Blue Line Futures and he is located in Chicago this morning. So, Tami, there you go. Choppy markets like we expected,
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